ABSTRACT
A state that subscribes to socialist principles is obviously unwilling to admit that prices obey the law of supply and demand, and chooses instead to fix prices, at least of some commodities. But because supply and demand is an infallible economic law, prices fixed by decisions of the state are bound to become, in time, lower than the real prices of these commodities. It follows that in order to maintain the prices at predesignated levels, the state must carry the difference between the sale prices and the real prices. Hence the need for subsidies.
